Extending generous unemployment benefits will drag out the economic crisis
According to a new analysis from the Congressional Budget Office, the next coronavirus relief package could spell disaster for our economy.
In a letter to the Senate Finance Committee, the nonpartisan CBO warned that extending unemployment benefits would discourage the jobless from rejoining the workforce. As the country emerges from lockdown and tries to ward off a long recession, that’s the last thing we need.
Congress passed its first COVID-19 stimulus package just as the outbreak began driving up unemployment. The CARES Act, which President Trump signed into law in March, created a $600-a-week federal supplement on top of a state’s unemployment benefits. According to an American Action Forum analysis of 2019 data, a little less than two-thirds of workers make less than the maximum weekly unemployment benefits available under the CARES Act.
The CARES benefits are set to expire at the end of July. Democrats want to extend them. The HEROES Act, which passed the House last month, would extend the $600 weekly unemployment supplement through January 2021. The Trump administration opposes that. Larry Kudlow, the director of the National Economic Council at the White House, argued that “almost all businesses” believe that the supplement was “a disincentive” to work. “I mean, we’re paying people not to work. It’s better than their salaries would get,” he told CNN’s Jake Tapper on Sunday.
According to the CBO, extending the $600-a-week supplement would make it so 5 in 6 recipients could earn more collecting unemployment than if they went back to work. Unsurprisingly, the CBO expects such a policy would keep unemployment high into next year.
More than 44 million people have filed for unemployment insurance during the pandemic. In the weeks since states began reopening, the unemployment rate has fallen, and the economy has added millions of jobs.
If the government continues paying people to remain unemployed, we’ll have a much harder time recovering from the physical and economic shock of COVID-19. The CBO has raised its concerns. Hopefully, lawmakers will get the message.